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Good morning!  I wanted to ask a question to complete some research.  Have you all seen an instance where a CO wants to do an award fee for completion for year 1 of a contract and then in year 2 of the contract, they want to move to a fixed fee arrangement which will last through the duration of the contract?   Is there any precedence in the government for this?  Or, would you all opt to choose one or the other for an extended period of performance as opposed to the mixed approach?  Any suggestion that you all are able to provide would be greatly appreciated.

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Good morning!  I wanted to ask a question to complete some research.  Have you all seen an instance where a CO wants to do an award fee for completion for year 1 of a contract and then in year 2 of the contract, they want to move to a fixed fee arrangement which will last through the duration of the contract?   Is there any precedence in the government for this?  Or, would you all opt to choose one or the other for an extended period of performance as opposed to the mixed approach?  Any suggestion that you all are able to provide would be greatly appreciated.

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If you are working for the government, what is the reason or rationale for using an award fee?  I don’t think that there is any prohibition against using a mixed approach. However,  it would be helpful to understand why the KO wants to do that before looking at other approach(es).

Depends upon the nature, goals and objectives of the acquisition and of the project.

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Is this a competitively or sole source negotiated contract action? If you are a proposed sole source contractor, this would be a topic for preliminary discussions/negotiation. 

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Interesting question with no research but my first instinct. 

It would appear that FAR 16.404  suggests that a mix is permissible.  Likewise a contract could have different completion milestones or in other words the government could accept this or that before the whole of the contract is accepted as completed.   So if there is a specific completion milestone for year 1 that is reasonable and attainable to which the award fee applies then I suppose one could do it.  I would say that I get a little nervous on providing my thoughts without the specifics of contract in front of me noting that you are talking "year" rather than something tangible and attainable.

 

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I’ve never seen a conversion like that.  But I’ve seen lots of award fee contracts where the fee factors get revised periodically throughout the term.  The factors in the first year often are geared towards both parties getting familiar with performance and perhaps the CO you mention may be thinking that way.  But rather than switch to a fixed price arrangement after that, I would consider establishing new factors that continue to motivate the contractor in the largest areas of concern.  

Maybe the CO thinks after a year, everyone gets comfortable and an award fee isn’t appropriate.  I would say if an award fee is deemed beneficial at the start, why wouldn’t you still want the contractor motivated?  In addition, there’s no reason why the fee determination has to be complicated.  The CO could used a streamlined approach with minimal administrative burden.
 

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See also the same question with some answers under contract pricing topic area. EDIT: Ok Bob Antonio merged the two threads here. 

Edited by joel hoffman
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1 hour ago, DreamChaser1911 said:

CO wants to do an award fee for completion for year 1 of a contract and then in year 2 of the contract, they want to move to a fixed fee arrangement which will last through the duration of the contract?  

What would be the proposed AF criteria? If there is some uncertainty about the schedule or completion work at the beginning of year 1, how would a contractor propose for both year 1 and year 2 before year 1 is completed? Is the proposed contract type the same for both years, and what is the contract type  i.e., fixed price or cost? 

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It's cool.  You can do an award fee in the first year to incentivize a good start and key milestones and so forth, and then use fixed fee for the remaining periods.  It is legal.  It is honorable.  Whether it fits your circumstance, I cannot tell -- but I wish you well.

There is no need for precedent.  If it fits, use it.  If not, don't.

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